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Posted 27 August 2017 - 02:23 PM
Posted 01 April 2019 - 09:36 PM
Central Planning, local experiments
The complex implementation of China’s Social Credit System
Main findings and conclusions
China’s Social Credit System is an ambitious, information technology-driven initiative through which the state seeks to create a central repository of data on natural and legal persons that can be used to monitor, assess, and change their actions through incentives of punishment and reward.
The Chinese government presents the Social Credit System as a cure-all solution to a multitude of disparate societal and economic problems such as the lack of options to assess the financial creditworthiness of market participants, food security, and insufficient protection of intellectual property rights.
Neither party-state nor private media fundamentally question the need for the Social Credit System. Social media coverage suggests that many citizens have yet to grasp what the Social Credit System is and what its implications in their daily lives may be.
Even if the full vision of the system is not realized, the scope of this project is massive and will transform China’s legal, social, and economic environment significantly.
Several social credit pilot projects are already operational, testing new approaches of collecting data and using it to sanction undesirable behavior on a limited scale. These punishments offer unprecedented possibilities to surveil and steer the behavior of natural and legal persons and therefore would have far-reaching consequences if adopted nationwide.
National implementation is still at an early stage: many of the measures put in place are establishing foundations for sharing information between different departments of government.
Media discussions of the information security and data privacy risks the system poses indicate a lack of consensus on how these issues will be regulated at the provincial and national levels.
The relationship between government and commercial actors will be a key factor to watch: Government agencies clearly depend on private companies’ technological know-how to roll out such a large-scale system. Conflicts and rivalry between bureaucratic and commercial players, however, could delay or even derail its implementation.
A versatile tool for steering behavior: understanding China’s Social Credit System
In 2014, the Chinese government announced detailed plans to create a Social Credit System (社会信用体系) that is meant to reward behavior the government considers financially, economically, and socio-politically responsible while also sanctioning non-compliance with its policies.2 Although the system is inspired by financial credit scoring systems in other countries, it surpasses these in at least three ways:
1) the broader scope of which criteria are evaluated for credit rating purposes,
2) the spectrum and efficient enforcement of punishments and restrictions imposed as a result of non-compliant behavior,
3) the growing use of digital sensors and devices that can continually collect and assess behavioral data in real time.
In the financial sector, credit scoring systems usually reduce transaction costs for loans or online payment services and hold market participants accountable to rules and regulations. However, the scope of the Chinese Social Credit System is by no means limited to financial measures of creditworthiness. The aim is to create a central repository of information on natural and legal persons that the state can use to monitor, assess, and ultimately change their actions through behavioral nudges using incentives of punishment and reward. It is based on a combination of traditional sources of data such as financial, criminal, and government records, along with digital sources including data collected by Internet of Things-enabled sensors and personal information that individuals provide to websites and mobile phone applications.
Years of social credit policy planning and refinement signify that the Chinese government has embarked on a pathbreaking course to comprehensively regulate, rate, and steer the behavior of individuals and companies.3 As currently envisioned, it is a wide-reaching project that touches on almost all aspects of everyday life. Social credit scoring will not only affect Chinese citizens and companies but will likely also impact foreigners living and working in China as well as have consequences for foreign companies operating in the country.4 In addition, the provision of social credit scoring services from commercial players such as Alibaba and Tencent, who are simultaneously expanding their global reach, raises questions regarding the extent to which the Social Credit System will collect and use data generated outside of China’s borders. Finally, if considered successful, China’s Social Credit System may eventually even become a model for other countries in the future.
Despite the anticipated pervasive social and economic impacts, many open questions remain regarding the scope of the system and how it will function when completed. This uncertainty poses a challenge to taking the necessary steps to adapt to the new environment the system will create in China. Individual iterations of the system are currently in the pilot testing phase and are either run by provincial or city governments, or by private companies hailing from the information technology, credit, and insurance sectors. One prominent example is Sesame Credit, a non-mandatory credit scoring pilot run by Alibaba’s spin-off company Ant Financial Services Group.5,6 While the private schemes are more publicly visible and form an important aspect of the broader Social Credit System, the Chinese government’s plans cover much more ground.7
In order to offer insight into what this system may look like in the future and provide a basis for adapting to it, this study examines the current state of implementation in two steps. First, it will analyze the vision behind the Social Credit System as it is presented in official media as well as how it is discussed in news media and social media in China. Systematic examinations of the range of views that Chinese regulators, scholars, and citizens have expressed regarding the Social Credit System are still largely absent from both domestic and foreign analyses of this new development. Secondly, this study will offer an assessment of the actual state of implementation of the system as of late 2017 based on policy documents, official government websites, reports, and concrete examples of how the Social Credit System is currently being put into action.
By analyzing both what is currently happening on the ground and how Chinese news and social media sources talk about it, we provide answers to questions of what shape China’s Social Credit System may take, and which problems its designers and implementers argue have yet to be solved.
Credit rating “plus”: China goes much further than other countries
Favorable news media reports:
boosting trust and integrity through technology
3. Media criticism:
either constructive or targeted at commercial providers
There may be ways to cheat the system
By and large, both news and social media are so far avoiding discussions about the potential for cheating or “gaming” the Social Credit System to artificially produce high scores. There is limited discussion of how to digitally manipulate one’s records, how state and private credit score providers will prevent such attempts at fraud, and what the punishments will be for these offenses.
However, one investigative article on Sina Weibo claims that there are data black markets through which Alipay users pay hackers who promise to raise their Sesame Credit scores. Users provide their Alipay usernames and passwords, and the hackers change the “binding data” that serves to identify users in their profiles, for example upgrading the information to falsely reflect that a user possesses several houses, an expensive car, or a degree from an elite university. The hacker interviewed in the article claims to have made millions of RMB in a few months’ time from these orders, even though this method has not been proven to raise Sesame Credit scores by more than a few points.16
This type of fraud poses information security risks given that users cannot guarantee that their Alipay login credentials will not be resold or implicated in identity theft once they have handed them over. As the Social Credit System unfolds, it is likely that additional methods of data forgery will arise.
Commercial providers are criticized for privacy infringements
The state of implementation: creating a framework, experimenting with pilots
No uniform standards for credit repair
Mechanisms of credit repair (修复) – the appeals process for disputing negative rating data and restoring one’s score to good standing – and opportunities for forgiveness of previous infractions differ by province and sector. Lian Weiliang, a Deputy Director of the National Development and Reform Commission (NDRC) has listed the lack of measures for credit repair as one of four points for improvement in the Social Credit System, signaling regulators’ awareness that the system must leave open avenues of redemption. At present, however, there are no uniform standards on credit repair for low social credit scores. Some province-level policies have suggested that volunteer work and donations to charity may serve as legitimate forms of reviving poor social credit ratings. However, policy documents have not yet addressed the problem of long-term reputational damage that comes along with being publicly shamed for what may be relatively minor infractions.
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